The New Zealand residential construction industry continues to soften due to a decline in new building consents and workloads.
The latest Cordell Construction Cost Index (CCCI) shows construction costs rose by 0.5% in the September quarter, a slight decline from 0.6% reflected in the first six months of the year, and the lowest figure reported since Q4 2020.
Meanwhile, the annual growth rate experienced a sharp slowdown dropping to 3.4%, from a peak of 10.4% in late 2022.
CoreLogic Chief Property Economist Kelvin Davidson said the annual index figure now dips below the 10-year average of 4.5%.
“We’ve now entered a more subdued phase for construction cost inflation, reflecting the marked easing in materials supply chains, compared to the COVID-affected period over 2021 and 2022.
“New dwelling consents remain elevated with more than 40,000 on a 12-month rolling basis. This is keeping builders still relatively busy working through a pipeline of previously-approved dwellings as well as a continued stream of work on alterations and additions.
“Although building capacity pressures have eased, half of project costs stem from labour and continued growth in wages is keeping some pressure on overall construction costs.”
Mr Davidson said a fair proportion of building components prices remained flat across the three months to September, with scattered increases and decreases across metal and timber materials.
He noted it’s likely new dwelling consent volumes will fall further, with workloads and construction costs continuing to moderate over the next two to three years.
“It wouldn’t be a surprise to see the quarterly rate of change in the CCCI continue in the vicinity of 0.5% for the next few quarters.
“While new builds probably won’t get cheaper, a controlled annual growth rate of 2-3% gives confidence for buyers to invest and for developers to keep bringing projects forward,” Mr Davidson said.
CoreLogic researches, tracks and reports on materials and labour costs which flows through to its Cordell construction solutions to help businesses make more informed decisions, estimate rebuild and insurance quotes easily and, ultimately, appropriate risk effectively.
The CCCI report measures the rate of change of construction costs within the residential market for a typical, ‘standard’ three-bedroom, two-bathroom brick and tile single-storey dwelling.
About CoreLogic
CoreLogic NZ is a leading, independent provider of property data and analytics. We help people build better lives by providing rich, up-to-the-minute property insights that inform the very best property decisions. Formed in 2014 following the merger of two companies that had strong foundations in New Zealand’s property industry – Terralink Ltd and PropertyIQ NZ Ltd – we have the most comprehensive property database with coverage of 99% of the NZ property market and more than 500 million decision points in our database.
We provide services across a wide range of industries, including Banking & Finance, Real Estate, Government, Insurance and Construction. Our diverse, innovative solutions help our clients identify and manage growth opportunities, improve performance and mitigate risk. We also operate consumer-facing portal propertyvalue.co.nz – providing important insights for people looking to buy or sell their home or investment property. We are a wholly owned subsidiary of CoreLogic, Inc – one of the largest data and analytics companies in the world with offices in New Zealand, Australia, the United States and United Kingdom.
About Cordell Building Indices
The Cordell Building Indices (CBI) are a series of construction industry index figures that are used to monitor the movement in costs associated with building work within particular segments of the industry. The CBI indicate the rate of change in prices within particular segments of the New Zealand construction industry.
The changes in prices are measured daily through the use of detailed cost surveys, and are reported on a quarterly basis. This ensures the most current and comprehensive industry information available. Each index is based on a combination of labour, material, plant hire and subcontract services required to construct buildings within the particular segment being measured. The CBI measure the change in the cost of constructing buildings, and as such do not provide the actual costs.
